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Dispute resolution in UAEAn overview on the recent

developments

R Venkata raghavan, FCIArbB.Eng, C. Eng, ACMA, PGDip Const Law &Arb

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• Why this topic is important for Indian Arbitrators?

• Overview of the UAE judicial system

• Current arbitration provisions of UAE

• Enforcement procedures for both domestic and

foreign awards in UAE

• Enforcement of UAE awards in other countries.

• Recent developments

Dispute resolution in UAE

An overview on the recent

developments

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• Several Indian blue chip companies are involved in the development of infrastructure, construction and oil exploration sectors.

Larsen & Tourbo, Dodsal, Voltas, Essar, TCS and Wipro

• There are hundreds of Indian entrepreneurs operating their business in UAE.

• NRIs are the leading property investors in Dubai.

Dispute resolution in UAE

Why this topic is important for Indian Arbitrators?

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INDIA and UAE

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UAE- Federation of 7 emirates

United Arab Emirates is a federation ofseven emirates namely

Abu Dhabi (Capital), Dubai, Sharjah, Ajman, Ras Al Khaimah, Umm Al Qaiwain &Fujairah. ©R Venkat

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UAE in 1960’s

In 1950’s and 60’s Dubai was a small town with fishing and pearl diving as their main source of trade

The pictures on the right were taken in 1960’s.

Today, UAE is a well-known commercial hub in the middle-east.

The total value of current UAE construction projects is around $1.249trn

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Dubai in 1960’s

(Sh Zayed Road)

Sh Zayed Road today

Growth of UAE

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Unfortunately, the global economic crisis did not leave UAE also!

• Construction disputes are on the rise since 2007

• Disputes between developers and contractors (on

unfinished projects)

• Disputes between developers and investors (non

hand over of the properties)

• Indian companies are affected!

• Arbitrators here can help their clients in risk

mitigation

Dispute resolution in UAE

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Traditionally litigation is the most common method of dispute resolution.

Even today, in commercial sector, litigation is quite common.

Construction related disputes are normally referred to arbitration.

Other ADR procedures like conciliation and mediation are used although they have no statutory basis.

Dispute resolution in UAE

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In general, the Court system

consists of a three tier

structure namely;

• The Court of First Instance,

• The Court of Appeal and

• The Court of Cassation

(except Ras Al Khaimah)

UAE Legal system

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• Each Emirate has its own court system.

• The legal system in the UAE is based on the

constitution of the UAE 1971

• The Civil law system and Sharia are the main source of

legislation.

• Statutes are the primary source of Law

• Judgments of higher courts are non-binding on the

lower courts.

• Each case is decided on its own merits and facts.

• All court proceedings are in Arabic

UAE Legal systemContinued

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Dubai; Emirate with two jurisdictions

In 2004, Dubai has commissioned a new court at the Dubai International Financial Centre

DIFC courts address commercial and construction disputes related to the “Financial centre” (Offshore).

The picture at the bottom right shows DIFC

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DIFC courts

• Follows the common law system and the proceedings are in English.

• DIFC court enjoys equal status as that of federal courts

• Judgments delivered at DIFC courts are enforceable in Onshore Dubai without further review.

• The judges are well experienced in international commercial disputes and they are appointed from overseas countries such as UK, Singapore, Malaysia.

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DIFC courts comprise of

• The Court of First Instance, • The Court of Appeal and • The Small Claims Tribunal.

In October 2011 , a legislation was passed extending jurisdiction of the DIFC Courts to include disputes outside the DIFC free zone.

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The Abu Dhabi Civil Procedure Code 1970 contains provisions to regulate the arbitration proceedings in Abu Dhabi,

The Dubai Contracts law 1971 provides for the referral of disputes to arbitration

The Dubai law of 1975 grants Dubai Chamber of Commerce jurisdiction to settle disputes between merchants through arbitration.

Under the UAE legal system, arbitration agreements are binding on the parties

There are no restrictions on the selection of arbitrators based on religion or gender.

History of Arbitration in UAE

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At present, UAE does not have specific legislation relating to Arbitration Law.

Arbitral proceedings are governed by the Civil Procedure Code (CPC) Articles 203 to 218.

The recognition and enforcement of foreign awards are covered by Articles 235 to 237 of CPC

Civil Procedure code is not based on UNCITRAL Model law.

Current law does not differentiate between domestic and foreign awards.

Commercial agency disputes, distributorship disputes and labour related disputes, are not arbitrable in UAE.

Current UAE legislation governing Arbitration

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• The arbitration agreement must be evidenced in writing.

• The signatory of the agreement must have notarised power of attorney.

• The hearing must be held within thirty days of appointment of the tribunal.

• An award must be rendered within six months after the date of the first hearing;

• The witness testimony in an arbitration hearing must be provided under oath.

Arbitration under UAE Civil Procedure Code

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• The party who wishes to rely on the arbitration clause must plead in the first hearing if the other party commences court proceedings.

• (otherwise the right to arbitrate will be deemed to be waived)

• An arbitration award must undergo a validation and ratification process like a litigation proceeding in order to be enforceable.

Arbitration under UAE Civil Procedure Code

Continued

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• If an award is challenged and declared void by the

Court, the current CPC does not provide an alternative remedy

• The courts do not permit that the award be referred back to the arbitrator.

• The dispute has to be referred to the Courts afresh as the referral is not automatic upon annulment of an award.

Arbitration under UAE Civil Procedure Code

Continued

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An arbitration award must be ratified in the local court to be enforceable.

(Article 215 of the CPC)

In the past, UAE courts have overturned the awards for apparently insignificant errors such as

The tribunal’s failure to sign each page of the award in full instead of simply initialling each page.

Concerns over the UAE court’s formalistic approach

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In the

Bechtel v The Department of Civil Aviation of the Government of Dubai case,

The Dubai Court of Cassation refused to enforce an award in favour of the Claimant on the grounds that the oath used to swear in witnesses during arbitration proceedings did not exactly follow the formula prescribed for UAE Court hearings.

Concerns over the UAE court’s formalistic approach

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It is noteworthy that the following points are unique to UAE CPC

• An UAE award must be physically signed in UAE;

• The legal representative of the party must have valid power of attorney to act in the proceedings and

• Witnesses should be present in the evidentiary hearing only when he is giving evidence.

Arbitration under UAE Civil Procedure Code

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There are three main major arbitration centres in UAE.

• The Dubai International Arbitration Centre (DIAC)

• The Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC)

• DIFC-LCIA centre, which is a joint venture between DIFC and the London Court of International Arbitration.

DIFC-LCIA has its own arbitration law unlike the other two, which follows UAE Civil Procedure Code.

Arbitration Centres in UAE

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Dubai is unique within UAE in offering two different possible Seats of arbitration.

DIFC has its own arbitration law which is modeled on UNCITRAL Model law

Any party can choose DIFC as the seat of their arbitration even when they have no connection with the DIFC free zone.

DIFC-LCIA arbitration awards must first be ratified by the DIFC courts. The awards are enforceable in Dubai and other Emirates without further review

DIFC-LCIA Arbitration Awards

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UAE is a signatory to the New York Convention. So,

UAE awards are enforceable in any state which is party to the New York Convention.

However, UAE CPC does not clearly specify the requirements for ratification of awards by local Courts.

Contrasted with that, DIFC awards are easily enforceable as they comply with UNCITRAL Model Law.

Enforcement of UAE awards outside UAE

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UAE is a party to several multilateral conventions:

• The Riyadh Convention, • Washington Convention on the Settlement of the

Investment Disputes (ICISD), • GCC convention for the execution of the judgments

and since 2006, • The New York Convention.

In the past, UAE courts have refused enforcement on the grounds of lack of proper jurisdiction, improper summoning and violation of public policy.

Enforcement of Foreign awards in UAE

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UAE is in the process of implementing a new Arbitration law. Proposed law is not exactly in line with UNCITRAL Model law

(influenced by Egyptian arbitration law, which is based on Model law)

In recent times, UAE courts have taken an arbitration-friendly approach

In April 2010, Fujairah Federal court of First Instance enforced two awards issued under the London Maritime Arbitration Association by a sole arbitrator.

Current developments

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In Dubai, the Dubai Court of First Instance enforced two awards issued under DIFC-LCIA Arbitration rules in London.

The Court commented that,

“The Court’s supervisory role.. to ensure that it does not conflict with the Federal decree under which UAE acceded to the New York Convention on the recognition and enforcement of foreign arbitral awards”.

The above decision was upheld by the Court of Appeal in February 2012.

Current developments

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Given this trend,

It is expected that UAE Courts will follow the requirements of the New York Convention regarding the enforcement of foreign awards

Dubai is aspiring to become an international arbitration centre similar to London, Paris, Singapore and Hong Kong.

UAE has a distinct geographical advantage, being close to Eastern Europe, Asia and Africa.

If the Federal Arbitration Law is passed it will certainly boost the confidence of any potential stakeholders.

Way forward..

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The DIFC courts and the arbitration centre,

• have instilled a great deal of confidence in international investors, and

• Their jurisdiction has been extended beyond the financial zone .

Way forward..

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• conciliation, • mediation and • expert evaluation.

There is no statutory framework for enforcing decisions of the conciliation boards and there are no specific dispute resolution boards in UAE.

RICS is now in the process of commissioning a DRB in Dubai.

The Chamber of Commerce in each emirate has their own conciliation rules

Other ADR provisions

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Disputes before federal courts must be first referred to a committee and if,

any agreement is made between the parties, then it is enforceable and binding.

However, orders of the committee are not enforceable.

Examples of such committees are

• The Special Judicial Committee to resolve tenancy disputes

• The Amicable Settlement of Disputes in Dubai.

Other ADR provisions

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So, here are few tips for advising your clients who has a business interest in UAE

• Ensure the dispute resolution clause in the contract is drafted carefully.

• Choose an appropriate Seat of arbitration

• Specify the applicable procedural law and rules of arbitration.

• Have at least one arbitrator of the tribunal who is familiar with both DIAC and DIFC arbitration procedures.

• The Award has to be ratified in local court to become enforceable!

Final thoughts..

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Here is a Recap

• UAE Arbitration Law is imminent.

• UAE is signatory to New York Convention

• UAE has geographical advantage

• Courts have shown less formalistic approach in the recent times

Soon UAE, especially Dubai will be a major international arbitration centre.

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Thank You!

R Venkata raghavan, FCIArbB.Eng, C. Eng, ACMA, PGDip Const Law &Arb

Email:rmvenkat@yahoo.comhttp://www.linkedin.com/in/vramadurai